A Responsibility to Speak: Citizens United, Corporate Governance and Managing Risks
Weinberg Center for Corporate Governance Working Paper Series No. 01-11
78 Pages Posted: 22 Feb 2011 Last revised: 26 Sep 2011
Date Written: February 16, 2011
Corporations have the right, under the United States Supreme Court decision Citizens United v. FEC, to make independent political expenditures in federal elections. Most public corporations are subject to some level of federal or state regulation of their business practices. Because regulations are the by-product of the political process, shouldn’t public companies exercise their right to influence the process by which regulations are created? This paper analyzes Citizens United from a corporate governance perspective and asserts that corporate political speech is a necessary fact of life for many public corporations. Additionally, the paper adds a new set of empirical findings to the literature which demonstrates that the decision in Citizens United and the associated right to speech does not have an adverse effect on the market value of firms. The paper further argues that Citizens United was based on assumptions regarding corporate governance’s ability to protect shareholders who may have opposing political beliefs. These assumptions do not hold true in the modern corporate marketplace. I argue that the personal political predictions of shareholders are largely irrelevant to the larger mission of the corporation - which is to enhance long-term shareholder financial value. Shareholders should not, as has been proposed, be given express rights to approve or disapprove political speech. To grant such rights would unnecessarily encroach into legitimate business judgment by adding another layer of shareholder sovereignty in addition to those granted by recent Congressional and regulatory action. Even assuming that corporations do not possess all of the attributes of natural persons for whom political speech rights were designed, corporate participation in the political process should be welcomed by shareholders who have economic incentives to gain, and by the public, who will benefit from the enrichment of political discourse.
Keywords: Corporate Governance, Citizens United, First Amendment, Risk Management
JEL Classification: K22
Suggested Citation: Suggested Citation